As long as they're only asking for donations, and not charging for it, it's legit.
Not true... ever heard of
Morroblivion? Now including Skywind and Skyblivion, originally the development was fraught with problems due to using models and textures lifted from one game and transplanted to another. Not just the technical challenge of reworking dated model formats to fit a newer game engine (all 3 games, Morrowind, Oblivion and Skyrim use the
Gamebryo engine -- the creation kit/engine is Bethesda's own version after Emergent went tits up and sold the assets to stay afloat), but also the legal issues facing the mod once released incrementally. You simply cannot re-use resources from one game in another legally, it states this clearly in the EULA for both game and mod kit, even if both games are from the same publisher or developer.
Bethesda do support the modding community, more so than most developers... but modification is just that, modifying the game to include custom content.
A similar example was where a modder attempted to combine FO3 with FNV. This was ended very swiftly after being announced/released on the Nexus. Not sure if it is hosted elsewhere on the net.
The workaround that seems to meet the legality is what is currently being produced on Skywind; you must have all games installed so the resources can be loaded (using a hook from the mod to the data folder of that game) without being repacked. It's worth a read to see how it all ties together, especially if you're into modding and/or game development.
Still, respected sites like the Nexus won't host it because it's still a very grey shaded area with only philosophical supporting arguments... there's been a vast amount of discussion on the forums for that very reason.
Of course, recreating the whole damn lot from scratch is another matter altogether and perfectly legal (I believe) because it does not lessen the value of something where proprietary income is received from, in the case of Daggerfall and Arena for example which are made available for free by the publisher.
I still love Arena--the sheer vastness of it for its day (the only ES game to feature all provinces)--partly the reaon why I'm looking forward to ES Online, not crazy about the MMO aspect though (griefers etc); I hope they follow a Guildwars-esque model where every player has their own personal copy of the world and can choose who to invite into it, sharing only cities and towns per default.
